I Think Demand Drives Supply, Which Drives Job Creation

[Aargh]

I've been wrong before and I will certainly be wrong again, but would someone please help me learn how this is wrong?


If more people have more money, they will buy (or use) more things. Then there won't be enough people making or providing things, so jobs will be created.


If the wealthy, who are the ultimate employers, get more money, there is no incentive to create jobs unless there is an increasing pool of people able to pay more for the product than the employers pay to produce the product.


I just don't see how jobs will be created by providing more funds to employers. Creating more jobs without a corresponding increase in demand is never going to happen. Demand drives supply. Supply does not drive demand.

[pinstripers]

Profit is the only reason to be in business, yes?

[Aargh]

Profit is the only reason to be in business, yes?

Please respond with a question that actually has an answer. No matter how that question is answered, the answer is wrong.

That, sadly, has become the modus operandi of both parties. The equivalent of "do you still beat your wife" seems to be standard operating procedure in politics today.

[pinstripers]

I'm not sure what you mean, but ok. Isn't profit the only reason to be in business?

[Maggie]

I think if you think about it you can answer your own question.

[pinstripers]

Taking away money from the supply side cannot work, then.

[1979Shocker]

There's a balance between supply and demand. The extremes are the consumer has no money (and won't buy anything) and has all kinds of money (and will buy everything). For this to balance out, how much (or how little) money can the consumer have and still produce enough demand?

[shocka khan]

Marginal Propensity to Consume - higher for people who are not wealthy
Marginal Propensity to Save - higher for the wealthy, as you have more money, theoretically (and in reality) you have more money to invest or save.
Supply side economics and the Laffer Curve - voodoo economics. Bush Sr. had it right.

As much as a bunch of the people hate democrats on this board, they do have a point about unemployment payments. The multiplier effect of unemployment benefits is significantly higher than the multiplier effect of a wealthy person getting a tax break. This is because the poor person spends all their money. The rich will spend some of their money, but also look to invest it elsewhere.

One piece of this that has been missing is the fact that there are fewer borders to capital these days. Capital can and does flow rather easily to other countries or economies. The wealthy investor class no longer invests their money in America. They invest it in emerging third world countries and then park it in tax havens like Panama or other Carribean countries.

Here's an interesting factoid: The Phillipines has some of the most strict data breach/data privacy laws in the world. Why? Because the Phillipines are trying to court call centers and back-office insurance and banking operations. They want companies to know that if operations are outsourced to their country that they can feel more comfortable that the government is managing the risk of a data breach better than their APJ counterparts.

I still remember Professor Perline playing the song 'When the Idle Poor become the Idle Rich' in my economics class, but that was 40 years ago.....

[Kung Wu]

At some point don't you sit back and say, "Damn, they are taking 45%+ of every average American's income -- including mine -- every single year."

Maybe the reason you don't have enough money is because you are way, way, way, way, way overtaxed?

[MoValley John]

Supply and demand only determines price. Supply doesn't drive demand, demand can influence supply, but at the end of the day, supply and demand arbitrates price.

[Dave Stalwart]

At some point don't you sit back and say, "Damn, they are taking 45%+ of every average American's income -- including mine -- every single year."

Maybe the reason you don't have enough money is because you are way, way, way, way, way overtaxed?

It's a big circle, too. When you create taxes for things, you take away money that could be spent in the market place. When you are taxing your people up to 45%, they don't have the ability to support your economy. It gets pretty complicated and at the end of the day you have to ask yourself "how many of our programs and entitlements and benefits are worth what the taxes do to our economy"

Then you have companies leaving the US altogether to get the better deals they get by existing in another country....similarly to how people will move out of New York or California to states that place less burden on them. Taking money from the rich and giving it to the poor may seem like a good idea until the rich decide to move away.

It's noble and good to care for people and attempt to make their lives easier and better, but I'm afraid we will become over extended as a country and marginalize our own economy. Our country needs to take care of its people to a certain extent, but it also needs to balance that with staying free and being competitive with the development of the rest of the world.

[pinstripers]

I don't hate Democrats on this board. I do hate "Progressives", though.

[MoValley John]

Supply and demand only determines price. Supply doesn't drive demand, demand can influence supply, but at the end of the day, supply and demand arbitrates price.

[MoValley John]

http://en.m.wikipedia.org/wiki/Supply_and_demand

Learn it, love it, live it.

[shocka khan]

Unfortunately, the Wikipedia model doesn't account for elasticity of demand. If demand for a good or service is relatively inelastic, an increase in price will not result in a corresponding drop in demand. The demand curve for gasoline is relatively inelastic. Demand for steak, on the other hand is relatively elastic, as an increase in the price of steak will cause a larger corresponding drop in demand as people will start eating hamburger (or Ken-L-Ration).